The sole issue for our consideration is whether the $10,500 petitioner received during 2005 was a gift or income. ...

Petitioner met Howard Shih through a mutual friend and they began dating. Mr. Shih earned his living as an artist and calligrapher. Eventually, petitioner’s relationship with Mr. Shih became more intimate. She moved into his home, and they cohabited. Petitioner did some housekeeping and cooking, but she did not work for Mr. Shih under any form of written or oral contract for services. Petitioner did not have any skill or experience in connection with Mr. Shih’s artistic endeavors.

During 2005 Mr. Shih gave petitioner checks totaling $10,500 to use for herself. Mr. Shih reported to respondent by means of a Form 1099-MISC, Miscellaneous Income, that the $10,500 he paid to petitioner constituted wage income and, ostensibly, he deducted the payments for purposes of computing his income for 2005. Relying on Mr. Shih’s filing of Form 1099-MISC, respondent determined that petitioner had received income of $10,500. ...

Mr. Shih was romantically involved with Ms. Yang, and she moved into his home. There were discussions of a formal engagement, and their relationship was intimate. Mr. Shih testified at the trial and his testimony concerning his romantic relationship with Ms. Yang was evasive. Mr. Shih was called by respondent and testified on direct examination that Ms. Yang had performed services in his business in exchange for the payments made to her during 2005. On cross-examination, however, after admitting that his relationship with Ms. Yang was more than a professional one, Mr. Shih could not recall taking her out on dates or any intimacy in their relationship, even though their relationship existed only a few years ago.

It is obvious that Mr. Shih and Ms. Yang have conflicting interests in the outcome of this controversy and that their positions are diametrically opposed. Mr. Shih structured the payments to Ms. Yang so that they appeared to be wages. He issued a Form W-2, Wage and Tax Statement, and used the notation “salary” or “wages” on some of the checks used for payment. Ms. Yang, however, was forthright in her testimony and answered all questions whether or not they favored her position. On the other hand Mr. Shih professed to remember only those things that supported his position that the payments were income to Ms. Yang. We find his testimony to be evasive and untrue.

The facts show that Mr. Shih made payments totaling $10,500 to Ms. Yang with “detached and disinterested generosity” out of his affection for her at the time of payment. We accordingly hold that the $10,500 in payments made during 2005 was a gift and not reportable as income.